HOUSTON (

TheStreet

) --

Dynegy

(DYN)

shares fell Monday on above-average volume even after the company announced a significant debt reduction initiative.

Dynegy said its wholly-owned subsidiary, Dynegy Holdings, will repurchase approximately $420 million of its outstanding 6.875% senior unsecured notes due 2011 and about $410 million of its outstanding 8.75% senior unsecured notes due 2012 from a fixed-income investor. The total represents 83% of the company's senior unsecured notes due 2011 and 2012, Dynegy said.

"This transaction will significantly reduce the company's debt obligations in 2011 and 2012, while also reducing interest payments and eliminating refinancing risks associated with our near-term debt profile," said Dynegy CFO Holli Nichols said in a statement. "With reduced near-term debt obligations through 2012, we are better able to weather near-term market uncertainty without a pressing need to access the capital markets."

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After climbing in the premarket session, shares of Dynegy were lately down 12 cents, or 6.1%, to $1.85. Earlier in the session, the stock touched an intraday high of $2.04. More than 5.5 million shares changed hands by 10:30 a.m. EST Monday, compared to the stock's three-month average daily volume of 14 million, according to Yahoo! Finance.

Dynegy has a 840.7 million-share float with a short interest float of 5.5% as of Nov. 30, according to Yahoo! Finance. Insiders hold only 0.4% of the company's shares, with another 74.9% owned by institutions.

-- Written by Robert Holmes in Boston

.

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